CFPB finalizes ‘Know Before You Owe’ amendment

The amendment will clarify when creditors may pass on increased costs to consumers and disclose them on a closing disclosure under the October 2015 rule.

The Consumer Financial Protection Bureau finalized an amendment intended to clarify its “Know Before You Owe” rule.

The amendment addresses when mortgage lenders with a valid justification may pass on increased closing costs to consumers and disclose them on a closing disclosure. The update is intended to provide greater clarity and certainty to the mortgage industry.

The ‘Know Before You Owe’ mortgage disclosure rule took effect Oct. 3, 2015. The bureau’s rule created new loan estimate and closing disclosure forms that consumers receive when applying for and closing on a mortgage loan.

Based on feedback from the industry, the bureau decided it needed to clarify when creditors may pass on increased costs to consumers and disclose them on a closing disclosure. Specifically, a timing restriction on when the creditor may use a closing disclosure to communicate closing cost increases to the consumer could prevent a creditor from charging the consumer for those cost increases despite a valid reason for doing so, such as a changed circumstance or borrower request.

In response, in July 2017 the bureau proposed an amendment removing that particular timing restriction. Today, after considering public comment on the proposal, the bureau is finalizing that amendment.

The amended rule will go into effect 30 days after it is published in the Federal Register.